When buying a home in Malaysia, selecting the right mortgage insurance is crucial. Mortgage Reducing Term Assurance (MRTA) and Mortgage Level Term Assurance (MLTA) serve different purposes and understanding these can save you money while ensuring financial security.
What Is MRTA?
- Purpose: Pays off the remaining home loan balance in case of death or total permanent disability.
- Cost: One-time premium, usually cheaper.
- Cash Value: None; covers only the loan amount.
- Who Should Consider: Individuals without dependents or those seeking a lower-cost option.
What Is MLTA?
- Purpose: Provides coverage and builds cash value, which can be withdrawn or borrowed.
- Cost: Higher premiums paid annually.
- Cash Value: Offers savings and investment elements.
- Who Should Consider: Families or those looking for flexible financial protection.
Comparison Table
Features
MRTA
MLTA
Premium Type
One-time
Annual
Coverage
Loan balance
Full sum insured
Cash Value
None
Savings/investment potential
Flexibility
Low
High
Example Scenario
Example 1: MRTA Costs
Ali buys a RM500,000 house with a 30-year loan. The MRTA premium costs RM8,000 upfront. If Ali passes away at Year 20 with RM200,000 remaining on the loan, MRTA fully covers the outstanding amount. Ali's family receives the property debt-free but no additional funds.
Example 2: MLTA Costs
John buys a RM500,000 house with the same loan tenure. He opts for an MLTA costing RM2,500/year. By Year 20, John’s MLTA accumulates a cash value of RM100,000. If John passes away, his family gets RM200,000 (outstanding loan balance) and an additional RM100,000 in cash.
| Features | MRTA | MLTA |
|---|---|---|
| Cost (30 Years) | RM8,000 (One-time) | RM75,000 (RM2,500/year) |
| Coverage | Loan Balance | Loan + Cash Value |
Disclaimer
These calculations are illustrative. Actual premiums and cash values depend on your age, health, and chosen policy terms.
Key Takeaways
- MRTA suits borrowers seeking low-cost coverage.
- MLTA provides flexibility and additional financial benefits, but at a higher cost.